Development and Bottlenecks of Renewable Electricity Generation

Critical Review pubs.acs.org/est

Development and Bottlenecks of Renewable Electricity Generation in China: A Critical Review Yuanan Hu and Hefa Cheng* State Key Laboratory of Organic Geochemistry, Guangzhou Institute of Geochemistry, Chinese Academy of Sciences, Guangzhou 510640, China S Supporting Information *

ABSTRACT: This review provides an overview on the development and status of electricity generation from renewable energy sources, namely hydropower, wind power, solar power, biomass energy, and geothermal energy, and discusses the technology, policy, and finance bottlenecks limiting growth of the renewable energy industry in China. Renewable energy, dominated by hydropower, currently accounts for more than 25% of the total electricity generation capacity. China is the world’s largest generator of both hydropower and wind power, and also the largest manufacturer and exporter of photovoltaic cells. Electricity production from solar and biomass energy is at the early stages of development in China, while geothermal power generation has received little attention recently. The spatial mismatch in renewable energy supply and electricity demand requires construction of long-distance transmission networks, while the intermittence of renewable energy poses significant technical problems for feeding the generated electricity into the power grid. Besides greater investment in research and technology development, effective policies and financial measures should also be developed and improved to better support the healthy and sustained growth of renewable electricity generation. Meanwhile, attention should be paid to the potential impacts on the local environment from renewable energy development, despite the wider benefits for climate change.

1. INTRODUCTION

An adequate and stable supply of electricity is one of the key supporting factors for economic growth in developing countries like China. As shown in Figure S1 of the Supporting Information (SI), the growth rate of the installed capacity of electricity generation generally lagged behind that of the gross domestic product (GDP) until the early 2000s. Nationwide electricity shortages emerged in 2002 due to the delay in construction of the power infrastructure.8,9 Since then, China has invested heavily in expanding its electricity generation capacity to meet the rising demand. Most of the electricity is generated from nonrenewable sources in China. Thermal power, hydropower, and nuclear power contributed to 80.3, 16.6, and 1.9% of the electricity generation in 2009, respectively.4 Thermal power generation is based primarily on coal combustion, which consumes half of the country’s coal production. The total coal reserves in China are approximately 114 billion tonnes, or 11.6% of the world’s proven recoverable reserves.10 Unfortunately, mining of coals causes significant damage to soils and vegetation, and to water bodies and aquifers through acid mine drainage. Furthermore, coal combustion releases significant amounts of air pollutants:

China is the world’s most populous country and has built a strong manufacturing-based economy over the past three decades.1 As the world’s factory, China has a wide range of energy-intensive industries and high-tech manufacturing. The manufacturing industry, covering a broad range of goods and services for both domestic consumption and export, is the pillar of the national economy and the basis for ongoing economic transformation. Along with the economic and social development, the rising living standards in China also significantly increase the individual’s energy consumption, primarily in the forms of electricity and petroleum fuels, in both cities and rural areas.2 As a result, demand for energy supply has been increasing with the rapid industrial and economic growth and fast urbanization in China.3 The country is currently the world’s biggest energy consumer, with about 70% of the energy consumption supplied by coal. The second-largest energy source is oil, which accounts for approximately 18% of the total energy consumption and depends heavily (>50%) on import.4 The remaining energy is supplied by hydropower (6%), natural gas (3.9%), nuclear power (1%), and other renewable sources (0.8%).5 Concerns about power shortages, energy security, air pollution, and greenhouse gas (GHG) emissions are all adding urgency and pressure to develop renewable energy sources in China.6,7 © 2013 American Chemical Society

Received: Revised: Accepted: Published: 3044

August 2, 2012 February 20, 2013 February 27, 2013 February 27, 2013 dx.doi.org/10.1021/es303146q | Environ. Sci. Technol. 2013, 47, 3044−3056

Environmental Science & Technology

Critical Review

Figure 1. Contributions of conventional and renewable sources to electricity generation in China and their predicted future growth to 2050 (data from ref 113).

Copenhagen Conference on climate change in 2009.17 Meeting these targets presents a significant challenge and requires strong contributions from all three sectors of the renewable energy industry: electricity, heat, and transport. Renewable electricity generation is the primary focus of the industry in China and worldwide. Renewable heat has been relatively well adopted as an economical alternative to fossil fuel heating, while relatively little attention has been paid to renewable transport in China (SI). This review focuses primarily on the development of renewable energy sources for electricity generation in China, and the technology, policy, and finance bottlenecks limiting their large-scale deployment.

approximately 1.0 kg of carbon dioxide (CO2), 8.0 g of sulfur dioxide (SO2), 6.9 g of nitrogen oxides (NOx), 3.4 g of fine particulates, and trace amounts of heavy metals are emitted into the atmosphere for each kilowatt hour (kWh) of electricity produced from coal-fired generation in China.11 Nuclear power has been gradually accepted as a safe and reliable energy source over the past several decades. Globally, nuclear power represents 16% of the total installed capacity of electricity generation, but the development of nuclear power industry in China has fallen far behind that of the developed countries.12 China had 16 nuclear reactors in operation and 26 reactors under construction by May 2012.13 With the country becoming increasingly self-sufficient in reactor design and construction, China aims to increase the installed nuclear capacity to 70−80 GW by 2020, 200 GW by 2030, and 400− 500 GW by 2050.14 However, concerns over the safety of nuclear power stations have been raised worldwide after the world’s worst nuclear accident at Fukushima Daiichi, Japan caused by an earthquake in March 2011.15 Following the steps of several developed countries, China froze the approval of new nuclear plant projects and conducted “full safety checks” on all existing reactors.16 The moratorium on the construction of new nuclear projects was lifted in late October 2012, but only a few nuclear reactors with “third-generation” technology that meets the highest international safety standards in coastal areas would be allowed to be constructed before 2015. According to the 12th Five-Year Plan for nuclear power passed most recently, China will have 42.9 GW of nuclear power generation capacity by 2015. China’s energy demand is expected to keep increasing driven by its highly energy-intensive economy and sustained fast industrial and social growth. Meanwhile, with the rising concerns on climate change brought by GHG emissions on the earth’s physical, biological, and human systems, China faces mounting pressure to curb its GHG emissions by reducing fossil fuel consumption. China made the official commitment to cut GHG emissions per unit of GDP by 40−45% from the 2005 level and increase the share of nonfossil fuels in the primary energy consumption to around 15% by 2020 at the

2. DEVELOPMENT OF RENEWABLE ELECTRICITY GENERATION IN CHINA Renewable energy sources, which account for a quarter of China’s installed electricity generation capacity, are already playing a role in supporting the country’s economic development and contributing to the national energy security. The Renewable Energy Law, which provides a legal framework for renewable energy development in China, was issued in 2005 to promote the development and use of renewable energy.18 According to this law, a total of 1.5 trillion Yuan would be spent to boost the share of renewable energy sources to 15% in China’s energy supply by 2020, making China a major player in the growing global renewable energy market. The amendment to the Renewable Energy Law in 2009 further raised the total investment on renewable energy to 4.5 trillion Yuan by 2020.19 Figure 1 shows the contributions of renewable sources to electricity generation (2005−2010) and their predicted future growth (2010−2050). Clearly, renewable energy has undergone rapid development in recent years. It is critical for China to continue developing renewable sources for electricity generation and integrate them effectively into the national energy systems to meet the rising electricity demand and to safeguard the country’s long-term energy security. 2.1. Hydropower. With the world’s largest number of hydroelectric generators, the renewable energy development in China is spearheaded by hydropower. The installed capacity of 3045

dx.doi.org/10.1021/es303146q | Environ. Sci. Technol. 2013, 47, 3044−3056


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in developing hydropower, in terms of both project size and electricity generation capacity, and built a well-developed hydropower industry. The country has the world’s largest number of hydroelectric generators, and hosts many large-scale hydroelectricity projects. More than 400 large- and mediumscale hydropower stations (>50 MW), among which 32 are above 1000 MW and 85 are above 300 MW, have been built or are under construction.22 There are also over 40 000 small-scale hydropower stations (2200 annual hours of sunlight and >5000 MJ/m2 of annual irradiation.39 Solar electricity generation has been gradually developed in China since the 1990s.40 Currently, the country is the world’s largest manufacturing powerhouse of photovoltaic cells, accounting for over half of the global production, and over 95% of the manufactured photovoltaic products are exported.41 However, the domestic solar power market remains underdeveloped because the cost of solar power generation remains too high to be competitive with other energy sources, and solar power, despite being technologically attractive, has not been developed as a top priority. The annual production of photovoltaic cells increased from 200 to 9000 MWp while the new installed capacity increased from 5 to 500 MWp between 2005 and 2010 (SI Table S1). The installed solar power generation capacity

technology, high reliability, high efficiency, and low power generation cost. 2.2. Wind Power. Wind power is the second largest source of renewable energy and one of the fastest-growing sources of energy in China. The annual electricity generation from wind reached 80 billion kWh in 2011, accounting for 1.67% of the country’s total electricity supply. With a long coastline and vast land mass, China has enormous exploitable wind energy (SI Figure 3a). The first wind farm in China was constructed in 1986, while the first offshore wind farm was not developed until 2009. Most of the wind power projects constructed in the early 1990s were funded by foreign assistance, while wind power underwent significant expansion in the past decade, as shown in Figure 2. Wind power development took off in 2003, particularly after the issuance of the Renewable Energy Law in 2005, which encourages the production and consumption of renewable energy through grid feed-in requirements and financial incentives.18 During the 11th Five-Year-Plan (2006− 2010) period, China formulated and released a series of policies to promote the development of wind power.28 As a result, the cumulative installed capacity of wind power increased over 100fold over the 2000−2010 period.29 China has the world’s fastest-growing wind energy market, and has overtaken the United States as the country with the highest wind power capacity (62.4 GW) in 2011.29,30 Despite being a low-cost renewable energy source, windgenerated electricity still costs considerably more than coalfired power generation except at some prime sites. The high equipment and maintenance costs of imported wind turbines previously limited the wide adoption of wind power in China. Only a limited number of manufacturers have developed independent design and manufacturing capacities, particularly for high-power wind turbines (SI). In the early development of wind power in China, little attention was paid to the pricing mechanism and the grid-connected electricity prices were very low, covering only the expense of wind farm maintenance. The pricing policy has gradually evolved from a floating price to a fixed price with variations over the years. The central government has been conducting wind concession programs, which combine governmental guidance and market competition, to promote the development of large-scale wind farms and the domestic production of wind turbines, and to reduce the cost of wind power since 2003.31 In July 2009, the NDRC introduced the first nationwide feed-in tariff for land-based wind power. Four wind energy zones (SI Figure S3b) were delineated with the corresponding price benchmarks of 0.51, 0.54, 0.58, and 0.61 Yuan/kWh, respectively, based on the abundance of wind resources and the availability of grid networks, partially to inhibit overdevelopment of wind power in unsuitable regions.32 The switch from floating to fixed price was widely regarded as a positive step in guiding further development of wind power, and the industry underwent explosive growth after its implementation. Similar to hydropower, the geographical distribution of the exploitable wind power is mismatched with the electricity demand (SI Figure S3a). The northern part of China and inland area have plentiful wind resources, while the major industrial and urban centers are located in the east and southeast. Consequently, the wind farms are usually located in areas far from the load centers and have weak grid networks, and long-distance transmission poses a significant challenge for grid connection. Despite the rapid development of large-scale wind power projects in the northwest in recent years, power 3047



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Figure 3. Growth of the installed biomass power generation capacity in China from 1985 to 2010 (data from refs 66, 68, 115).

recent collapse of solar panel prices due to global overproduction, the cuts in subsidies of major feed-in tariff markets, and the trade barriers for Chinese solar products in the U.S. have shattered the photovoltaic bubble in China, with most photovoltaic companies suffering huge losses. The government has been trying to absorb some of the country’s massive photovoltaic oversupply by encouraging domestic installations. To raise domestic demand for solar panels, the government recently agreed to subsidize small solar power stations with solar panels installed on building roofs, while State Grid would allow connection of small solar power stations to its transmission grid. As the overseas solar power market shrinks, many companies are exploring domestic opportunities, while developers are taking advantage of the very low prices of solar panels and actively developing solar energy projects. Consequently, China is expected to transform from a big producer of photovoltaic cells to a leading user of solar power in the foreseeable future. 2.4. Biomass Energy. China has rich biomass resources: the total exploitable annual capacity of biomass, in the forms of crop residue, manure, forest and wood biomass byproduct, municipal solid waste (MSW), and wastewater resources, is estimated to be 13.5 EJ, while the potential quantity can reach 102.9 EJ.49 Figure 3 shows the growth of biomass power generation in China from 1985 to 2010. Despite the fast growth in biomass energy utilization under heavy investment in recent years (SI Table S2), the development of biomass energy remains at an early stage due to cost and technological constraints, and the biomass resource is mainly utilized in the form of conventional combustion.50 Biomass power generation was dominated by combustion of bagasse (sugar cane residue) prior to the early 2000s, while the share of MSW incineration increased steadily over the past decade. Clean, low-cost fuels for heat and electricity based on modern biomass technologies could significantly improve the living standards, accelerate rural industrialization, and create employment opportunities in rural areas.51,52 Because industrialized farming is rare in China, collection, transport, and storage of the supply material, especially agro-forestry wastes, poses a significant logistical challenge.53,54 Biomass power

reached 860 MW by the end of 2010, accounting for less than 0.1% of the total installed electricity capacity. The solar power market in China had grown slowly prior to 2009, primarily due to the high cost of photovoltaic cells and the lack of government subsidy to help defray their cost. The first domestic solar subsidy, the building-integrated photovoltaics program, which offers 20 Yuan upfront subsidy per watt of installed solar power capacity, was established in March 2009.42 In July 2009, a bold “Golden Sun” program was launched, which subsidizes 50% and 70% of the total costs for qualified on-grid and off-grid solar projects, respectively.42 A nationwide feed-in tariff for solar projects, which sets the solar energy benchmark prices at 1 Yuan/kWh (up to 1.15 Yuan/ kWh for some projects), was announced in July 2011.43 The full enactment of this solar feed-in tariff is expected to spur solar energy development. With the fast development of solar technology and the recent financial stimulus, the target for the installed capacity of solar energy in 2020 has been recently raised to 20 GW.44 It is expected that the cost of solar electricity generation will decline further with continued research and development on photovoltaic cells, and will even become competitive compared to conventional energy sources.45−47 Besides its high capital cost, grid connection is another major barrier for solar power development.48 There are >3000 sunshine hours per annum in vast areas of western China, where solar energy resource is rich but population density is very low (SI Figure S4). In contrast, the heavily populated coastal regions in the east and southeast represent most of the energy demand. As the lag in grid construction already caused significant wastage in the large-scale development of wind power in the west, development of on-grid solar energy is currently unattractive. Meanwhile, small-scale photovoltaic systems are more cost-effective and promising compared to expansion of existing electricity grid in rural areas of western China. With the rising demand for renewable energy and generous government subsidies for photovoltaic panels in the E.U. and U.S., explosive growth in solar module manufacturing capacity occurred in China after the global financial crisis in 2008. The 3048



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plants are often built close to the supply zones to use the resources locally. However, overdevelopment of biomass energy plants in some areas have resulted in shortages of crop residual, which increased the cost of electricity generation and compromised their power output.53−55 Therefore, biomass power plants should be developed with full considerations of the potential resource supply, transportation, and household and community needs.56 Because of the dispersed availability of biomass and its seasonal variation, decentralized utilization, such as middle-scale (1−10 MW) biomass gasification and power generation technology may be more feasible than largescale biomass direct combustion and power generation technology.55 Effective government regulations and coordination on biomass energy plants are critical for the healthy growth of the industry. To this end, the NDRC recently issued a new regulation on limiting the number and size of biomass power plants, which allows only one plant with no more than 30 MW installed capacity within a 100-km radius area in straw-rich regions.57 Besides providing clean energy, biomass utilization represents an opportunity to improve environmental conditions through disposing of the wastes from cities and rural areas.58 Waste-to-energy incineration, which helps solve the problem of MSW disposal while recovering the energy from the waste, is expected to continue expand rapidly, although attention should be paid to control the emissions of heavy metals and organic pollutants.58−63 In contrast to other biomass power plants, MSW is delivered to the waste-to-energy facilities and a tipping fee is also paid by the waste generators. However, these facilities also encounter extra problems, such as wastes with low heat contents and high moisture contents, and coal is often used as a supplementary fuel for cocombustion in China.58−60 In addition, air pollution control devices are required to remove a range of pollutants that can be formed during incineration of the waste,61−64 which significantly increases the operating cost. Unlike other types of biomass energy, the environmental impact should be carefully considered when developing wasteto-energy incineration plants. The development of biomass energy in China is currently limited by the lack of modern technology to efficiently generate electricity from biomass. Biomass direct combustion and power generation, biomass gasification and power generation, and cofiring power generation technologies have been developed and employed to various degrees in China.55 Important progress has been made in small- to middle-scale biomass direct combustion and power generation technology and biomass gasification and power generation technology, although these systems still suffer from the general problems of low efficiency and poor reliability of devices.53,55,65 Due to the lack of core technologies and experience, China relies mostly on foreign countries for advanced technical equipment and high-tech materials, and the domestic research on system integration is also far behind that of developed countries.53,66 The rather immature biomass technology and weak innovative strength have hampered the growth of biomass energy industry in China.65,66 With a focused government program for research, technology development, and demonstration, the biomass energy industry in China is gradually narrowing the gap with the developed countries in technology development, equipment manufacturing, and plant services. On the other hand, the imported technologies, which often do not sufficiently consider the local conditions, may not work well in China,53,55 and require extra training of the workers and maintenance.58,59,67

There is a critical need for domestic equipment manufacturers to absorb advanced biomass technologies through technology transfer and collaboration with leading international technology providers to improve their technological capability.65 Biomass power generation is expected to keep growing in agricultural areas and make an important contribution to rural sustainability in China.68 2.5. Geothermal Energy. Although geothermal resources are abundant and widely distributed in China, the country lags behind most geothermal countries in geothermal electricity production, and the vast geothermal power potential is largely untapped.69 China has conducted extensive explorations of geothermal energy since the early 1970s.70 Over 3200 geothermal spots, which release 0.1 EJ of heat annually, have been discovered.71 Approximately 80% of the geothermal spots in China are at or below 100 °C;71 such low-temperature geothermal resources are more technically challenging to harvest compared to the high-temperature ones. With the lack of government support and limited by the low availability of technology to efficiently generate electricity from low- and moderate-temperature geothermal resources, development of geothermal electricity production has been rather slow. Despite the rapid increase in geothermal power capacity worldwide, China currently has only three operating geothermal power plants with a combined capacity of 19.15 MW due to the decommission of plants and generator units developed in the past (SI Table S3). Geothermal power production, which is cost-effective, reliable, sustainable, and has low emission intensity, should play a greater role in China’s energy and climate mitigation plans.69

3. BOTTLENECKS OF RENEWABLE ENERGY DEVELOPMENT IN CHINA Despite the comprehensive policies and financial measures, including laws and regulations, direct subsidies, market-based incentives, feed-in tariffs, tax breaks, and preferential loans, laid out to accelerate the growth and adoption of renewable energy,71 there remain many critical challenges and uncertainties limiting fast expansion of the industry. These bottlenecks can be classified into the categories of technology, policy, and finance, as discussed below: 3.1. Technology Barrier. The renewable energy industry has intensive technology demand and requires significant investment in research and development. China generally lacks the advanced technologies in developing renewable energy except for hydropower, partially due to insufficient investment in research and technology development in the past. Most of the domestic renewable energy equipment producers are small companies, and their products meet mostly the lowend needs.72 As a result, renewable energy development in China has largely depended on imported equipment, such as high-power wind turbines and biomass direct combustion boilers. Limited access to technology that is not available or available at very high cost has significantly increased the production cost of renewable energy and reduced its competiveness. Currently only the price of hydropower is competitive to conventional coal-fired electricity in China. Table 2 summarizes the representative prices and cost structures of electricity generated from various energy sources. Renewable energy plants are characterized with much higher proportions of the construction cost than coal-fired power plants, and almost zero fuel costs with the exception of biomass power. The higher costs of renewable energy compared to coal3049



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power outages or network overload. However, the intermittence of renewable energy makes meeting such a requirement significantly more challenging while it has been not easy for traditional thermal power plants. Smart grid, which holds the potential to successfully integrate the distributed power sources (including renewable energy) and to efficiently deliver reliable and sustainable electricity services, has been elevated to a strategic national priority in China. Smart grid differs from the conventional power network in that it manages the power system on both the supply side and the demand-side instead of controlling the supply strictly to match the uncontrolled demand.79−81 In China, smart grid is still a relatively new concept, and faces many technical problems, such as power network topology, communication system, metering infrastructure, and demand side management.82,83 Pilot projects have been launched to address these challenges and to standardize the smart grids in the country.84 China is going to invest 2 trillion Yuan on electric power infrastructure upgrades between 2010 and 2015, and another 1.7 trillion Yuan to modernize the national power grid between 2016 and 2020.85 A nationwide strong and smart grid will be completed by 2020, which is expected to reduce up to 10.5 billion tonnes of GHG in this decade through large-scale renewable energy transmission and consumption, energy conservation, efficiency improvement, and promotion of electric vehicles.86 Decentralized power systems that rely to a large extent on small-scale generation from renewable energy sources can serve as a supplementary measure to the existing centralized energy systems in China for optimal use of renewable energy. The fluctuations and intermittency of electricity supply from renewable sources can be evened out and balanced by temporary energy storage and units with quick-start capability, such as pumped-storage hydropower and quick-start gas turbines.87,88 Meanwhile, integration of decentralized renewable energy systems based on multiple sources into the grid system can potentially help stabilize the power load. With the development of smart grids, the power producers and the consumers can communicate with each other and adjust to the changing supply of renewable energy.80,84 Thus decentralized power systems allow greater active participation of the consumers and more efficient use of energy in areas with significant penetration of renewables from multiple sources, while reducing the electricity loss through the transmission and distribution networks.89 Meanwhile, significant restructuring in operations and planning of the power industry is necessary for large-scale integration of distributed generation sources, and there are a series of significant physical and technical barriers to decentralized electricity systems, such as increased reserve requirements, need for forecasting, excess production, and energy storage.89,90 Decentralized energy systems based on locally available renewable energy resources, such as hydropower, wind power, and solar power, are also expected to play an important role in rural electrification by expanding the access to clean energy to remote communities in China. Compared to the extension of grid power, such small electric systems can be more efficient and cost-effective, and contribute to sustainable development by providing affordable energy and creating employment. 3.2. Policy Barrier. Government policies play a key role in guiding the development of renewable energy through impacting the active investment, technical development, and market growth.91 Globally, renewable energy sources are not cost-competitive with fossil fuels, and their development is

Table 2. Typical Costs of Electricity from Coal-Fired Power Generation and Renewable Sources in China (Data from Ref 112) makeup of the cost structure (%) electricity source

production cost (Yuan/kWh)

construction

maintenance

fuel

coal-fired generation wind power solar power biomass energy geothermal energy

0.2−0.5

35

20

45

0.5−1.0 0.8−1.5 0.4−1.0 >1.0

95 99 50 80

5 1 20 20

0 0 30 0

fired generation have been, and will continue to be, a significant barrier for its wide adoption. The dependence on foreign technologies and core technical equipment has significantly restricted the healthy growth of the renewable energy industry in China. It is critical for domestic manufacturers to make the strategic shift from reliance on foreign technologies to independent research and technology development in wind power, solar photovoltaic, and biomass energy. Globally, transmission grids and storage capacities are major technical bottlenecks to the penetration of renewable electricity in the energy mix.73,74 In China, many of the renewable energy sources (e.g., hydropower, wind power, and geothermal energy) have strong geographical dependence, and large-scale renewable energy facilities are rarely located near industrial centers or large cities. The spatial mismatch in renewable energy supply and electricity demand requires construction of long-distance transmission networks, which raises the cost of energy distribution and reduces the overall energy efficiency. There is a compelling need to expand the capacity of the electricity transmission system in areas where grid coverage is currently sparse but that are expected to provide large amounts of renewable energy.75 How to connect the intermittent electricity generated by renewable sources to the power grid is another major challenge after construction of the transmission network. The large fluctuation of renewable energy output makes transmission of the generated electricity into the grid much more difficult than thermal power.34 Large-scale integration of the electricity produced from intermittent renewable sources, particularly wind and solar power, into the electricity system brings two major problems: their generation capacity is nondispatchable and their intermittent power generation requires more fastresponding dispatchable power units. Consequently, increased market penetration of renewable electricity is often difficult and costly, and the intermittent renewable energy sources must interact with the conventional generation units (e.g., coal-fired generation) to meet the peak demand of the system and to maintain a balance between supply and demand.76,77 Combination of different renewable sources, which have varying resource availability and fluctuations, to form an optimal mixture can increase the resilience of the electricity to “variable renewable energy”.76 Besides diversifying variable renewable sources by type and location, measures such as energy storage, demand-side management, and integration with dispatchable power generation (e.g., gas-fired generation), should also be taken to make the transmission grid more robust and flexible.76−78 A good electricity generation, transmission, and distribution system should balance the power supply and demand to avoid 3050



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Figure 4. Institutional arrangement related to energy resources management in China.

necessary to increase the share of renewable energy in the market at reasonable costs. Besides the pricing mechanisms, power purchasing regulations for renewable energy have gained increasing attention in China recently. The amendments to the Renewable Energy Law in 2009 set requirement for the power grids to acquire the electricity generated from the renewable energy projects that are within the grid coverage area and conform to the technical standards of grid-connection.19 To further spur the consumption of renewable energy, China is expected to launch a nationwide quota system for renewable energy in power generation and consumption during the 12th Five-Year-Plan (2011−2015) period. A green electricity certificate system may also be launched together with the quota program, and trading of such green electricity certificates is expected to stimulate the development of renewable energy more cost-effectively. However, the difficulty in building a transparent verification and transaction system may delay its eventual introduction. Consistent support from technical regulations and administrative orders is necessary for the successful implementation of the Renewable Energy Law. Similar to the management of other resources, such as water,26,27 the management of energy resources is also highly fragmented in China with many government institutions having certain authority on energy development (Figure 4). Unfortunately, their policies and regulations were often inconsistent and uncoordinated, hindering the development of the renewable energy industry and the integration of renewable energy into the power grid. In particular, it is time-consuming for the renewable energy plants to connect to the grid networks because of the complicated project review, design approval, and construction processes. The lag between the construction of the power plants and the grid connection has resulted in significant wastage of the renewable energy generated. A comprehensive policy framework is critically needed to address a wide range of issues, including the lack of connection standards, uncoordinated development of next-generation models, inadequate financing for new or upgraded transmission capacity, insufficient planning for the electricity market to incorporate intermittent sources, and poor financial incentives for grid operators to accept renewable electricity.75 The local governments also play an important role in the generation, transmission, and consumption of renewable energy. They have the administrative responsibilities on

typically supported by some form of government-sponsored carbon valuation or subsidy. Therefore, a country’s energy and environment policies can significantly influence the relative competitiveness of various sources of renewable energy. China’s renewable energy policy framework has been shaped over the past three decades and has played an important role in promoting the development of the industry.71 The issuance of the Renewable Energy Law in 2005 has led to significant expansion of the installed capacity of renewable energy. Overinvestment and uncontrolled growth has occurred in hydropower and biomass power in China because hydroelectricity is even cheaper than coal-fired power, while biomass power receives very high subsidies in some regions. For the development of the other types of renewable energy sources, the financial institutions are reluctant to invest because they are not profitable without excessive government subsidies. Meanwhile, various levels of government do not put high priorities to such projects because of the associated financial burdens. It should be noted that the consumption of renewable electricity still lags behind the rapid growth in the installed capacity in China. The power grids showed little enthusiasm for adopting renewable energy because of the high costs and low profit margins, besides the technological challenges. To push the wider penetration of renewable energy into the power grid, the central government has established special pricing mechanisms and electricity purchasing regulations.92,93 As one of the most effective measures to promote renewable energy development, pricing mechanism plays an important role in encouraging the investments and ensuring the long-term sustainable development of the market. Currently, the pricing mechanisms for renewable energy in China are not well developed and many generators operate under floating-price contracts. The transition from floating prices to fixed prices, which reduces the price volatility and protects investors’ profit, has been regarded as a positive step in the pricing policy. Landbased wind power adopted fixed feed-in tariffs with variations in 2009, and biomass power (agricultural and forestry biomass only) on grid received a nationwide fixed price of 0.75 Yuan/ kWh in 2010. China also set up fixed prices for photovoltaic projects in 2011. It is expected that offshore wind power and biomass−coal cocombustion power generation will also adopt similar pricing schemes gradually. Nonetheless, further refinement and improvement of the existing pricing mechanisms are 3051



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these projects are generally subject to lengthy and critical approval processes by domestic banks. Private capital is also reluctant to finance renewable energy projects because of their uncertain profitability and the unfair competition from large state-owned enterprises, because the energy sector, including electricity generation, transmission, and distribution, is highly controlled by the government. Due to the lack of reliable channels for funds, many renewable energy developers had to seek funding through foreign stock exchanges.71,98 Overall, a comprehensive investment and financing framework for renewable energy has yet to be developed in China. It is necessary to attract more investment from different funding channels and to encourage investment on technology innovation and cost reduction. An effective and efficient financing system is needed to strike the balance between encouraging more investors to engage actively and ensuring the quality of projects, which is critical for the healthy and sustained growth of the renewable energy industry. It should be noted that the key driver for the development of the renewable energy industry should be the market, not the policies, and that a large and sustained market is necessary for the healthy growth of the industry in China. Despite the environmental benefits, renewable energy must be able to produce electricity at costs competitive with conventional forms of electric power to obtain a guaranteed market share. The significant geographical variations in renewable energy resources and market demands make it difficult to set uniform pricing for grid-based renewable energy, which increases the uncertainty and complicates the market development. At the same time, the market prices of conventional energy rarely account for the environmental cost, which negatively affects the competitiveness of renewable energy. The highly controlled nature of the energy sector, the lack of market infrastructure, the high capital investment, and the lack of competition all adversely reduce the competitiveness of renewable energy and ultimately increase the costs of renewable energy to the consumers. Government policies can promote and guide the development of renewable energy to a limited extent. However, healthy growth of the industry is not possible without the existence of markets that reap economic, as well as environmental and social, benefits from the use of renewable energy. A series of government policies, primarily financial, have been developed in China to create a market for renewable energy and to pull wind, solar, and biomass energy into the marketplace. Meanwhile, Chinese companies should invest significantly in research and technological innovation to increase their core competitiveness in the domestic and international energy markets.

implementing the rules and regulations developed by the central government, but can also play active roles in the policy innovation and decision-making system to promote the development of renewable energy based on the supply of energy mix and the local economic situations. They are ultimately responsible for coordinating with the generators and the grid companies to ensure the renewable energy generated is delivered to the end-users. Governments of the rural and remote areas should particularly support the development of distributed renewable energy projects to exploit local resources cost-effectively and to alleviate the in-grid pressure. 3.3. Finance Barrier. Financial barrier impedes the widespread commercialization of renewable energy technologies, which have much higher capital costs than conventional ones. Overall, renewable energy sources, with the exception of hydropower, are still in the early stages of commercialization in China and their cost competitiveness is weaker compared to coal-fired power (Table 2). Higher capital costs of power plants based on renewable energy mean that they generally provide less installed capacity per unit investment than conventional energy and require larger investments for the same generation capacity. Meanwhile, there are very limited financing options accessible to the project developers and consumers. The renewable energy projects and grid connections in China depend highly on the support from the central and local governments, which compensate the costs by providing subsidies in the form of tax credits or incentives. Two special funds that support renewable energy generation and exploitation, and subsidize the extra costs for renewable energy plants and grid networks, have been created under the Renewable Energy Law.18 Various specialized subsidies and tax reductions have also been developed to support renewable energy sources over the years.94 As a result, the number of renewable energy projects receiving government subsidies, the installed capacity, and the feed-in capacity all increased by almost 10 fold from 2006 to 2009.92 With the exception of hydropower, development of renewable energy is heavily subsidized by the government, while the rapid growth of renewable energy has resulted in heavy financial burden on the government and society. According to NDRC, the subsidy programs for renewable energy had shortages of about 2 and 10 billion Yuan in 2010 and 2011, respectively. Consequently, the electricity surcharge was doubled from 0.004 to 0.008 Yuan/kWh in 2012, except for residential and agricultural uses. Meanwhile, the cost effectiveness of the subsidy programs already caused public concerns, as the subsidies for technology commercialization and demonstration resulted in many noncost-effective and low-level redundant projects without careful investigation and planning. Loans and donations by foreign government and international institutions, as well as direct foreign investment, also contribute to the development of renewable energy in China. In particular, China has the world’s largest and most dynamic CDM market and is a major recipient of CDM funding.95 Around three-quarters of China’s CDM projects have been launched in the renewable energy field, including small hydropower, wind power, solar power, and biomass power generation96,97 Compared to the government support and international funding, bank loans and private capital have played very limited roles in the development of renewable energy. Due to the higher risk yet lower return of renewable energy (with the exception of hydropower) compared to conventional energy,

4. ENVIRONMENTAL IMPACTS OF RENEWABLE ENERGY DEVELOPMENT Coal is expected to continue to dominate China’s energy mix and fuel the growth of its carbon-intensive economy in the near future. Besides the massive emissions of GHGs, serious air pollution has occurred because of the country’s coal-dominated energy consumption.99−101 Large-scale deployment of renewables for electricity generation helps diversify the energy supply and provides significant benefits to the local and global environment. High-tech development zones and eco-industrial parks play the leading role in China’s push toward a low carbon economy. Most of these parks host technology development and production of renewable energy-related products, particularly photovoltaic cells, and wind and biomass power 3052



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Table 3. Summary of the Major Adverse Environmental Impacts Associated with Renewable Energy Development energy source hydropower

wind power

solar power

biomass energy geothermal energy

major adverse environmental impacts reservoir creation may cause significant loss of productive agricultural land; dams disturb the existing plant and animal species in the ecosystem; fluctuations of water levels in the reservoirs alter shorelines and cause downstream erosion; changes in river discharge patterns can adversely reduce downstream water quality and biota, and increase water evaporation loss. wind turbines may create serious land-use conflicts; wind turbines impact landscape scenery and may produce noise; wind turbines can affect wilderness areas, and pose potential hazards to birds. solar power plants require large amount of land, and may negatively impact wildlife protection; production and installation of solar components require energy; hazardous materials such as cadmium and arsenic are often used in the production of photovoltaic cells; disposal of inoperative photovoltaic cells could become an environmental problem. combustion of biomass and biomass-derived fuels produces air pollutants, such as carbon monoxide, nitrogen oxides, and particulates; land is required to grow energy crops, and the energy farming can increase chemical use, affect biodiversity through the destruction of species habitats, and deplete organic matter and nutrients in soils. geothermal energy utilization causes surface disturbances, and it is challenging to site plants in scenic or environmentally sensitive areas; fluid withdrawal in the subsurface can cause land subsidence; steam vented at the surface often contains hydrogen sulfide, ammonia, methane, and carbon dioxide, which contribute to air and water pollution; sludge containing silica and toxic heavy metals is also produced during geothermal power plant operation; geothermal power plants often require large amounts of water for cooling or other purposes, which could conflict with other water users.

generation equipment. Some of them are also leaders in adopting renewable energy, mainly in the form of solar electricity generation, biomass power generation, solar thermal heating, and geothermal heat pump. They serve as examples in the development and utilization of renewable energy for the rest of the country. In general, all renewable energy sources offer the environmental benefits of lower GHG emissions and reduced emissions of pollutants, and they can also make small-scale energy sources available locally. Compared to fossil fuels, renewable energy sources all have significantly low life-cycle GHG emissions, and their adoption can reduce the GHG emission significantly in the energy sector.102−104 By reducing the emissions of air pollutants, renewable energy sources also provide immediate and significant benefits to the environment and ecosystem (SI Table S4). At the same time, no energy source is completely free of negative environmental impacts, and renewable energy development can damage the local environment and cause conflicts between economic interests and environmental protection.105 Emissions and environmental impact can occur during the construction, operation, and decommissioning of renewable energy plants, and the cultivation, harvesting, collection, transportation, and processing of biofuels as well. Table 3 summarizes the major adverse environmental impacts associated with the development of various renewable energy sources, which are often considered “green”. One major challenge for renewable energy projects is that they often require much more land area than conventional energy sources (e.g., coal-fired power plants); this is particularly true for solar power and biomass energy. Wind turbines, as well as transmission-line towers, which are often necessary for transmission of the renewable energy generated to the industrial centers or large cities, also affect wildlife, particularly birds. Production of bioenergy feedstock often threatens biodiversity, and impacts the quality of water and soils through applications of fertilizers and agrochemicals. More raw materials and fossil fuels may even be consumed in developing renewable energy systems compared to building comparable conventional ones. Therefore, attention should be paid to the potential impact of renewable technologies on the local environment,

despite their significant global climate benefits, to minimize disturbance of local ecosystem during the course of renewable energy development in China.

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ASSOCIATED CONTENT

S Supporting Information *

Additional information on the development of renewable heat and transport, wind turbine manufacturing capability, production of photovoltaic cells and domestic installation, growth of investment on biomass power generation, status of geothermal power plants, emissions from renewable and nonrenewable energy processes, growth rates of GDP and installed electricity capacity, distribution of hydropower resources, distribution of wind energy resources and the four wind energy zones, distribution of solar energy resources, and the exchange rate history for converting Chinese Yuan to U.S. Dollar and Euro. This information is available free of charge via the Internet at http://pubs.acs.org/.

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AUTHOR INFORMATION

Corresponding Author

*Phone: (+86) 20 8529-0175; fax: (+86) 20 8529-0706; e-mail: [email protected]. Notes

The authors declare no competing financial interest.

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ACKNOWLEDGMENTS We are grateful to the reviewers’ valuable comments that improved the manuscript. This work was supported in part by the Natural Science Foundation of China (Grants41202251, 41073079, and 41121063), and the Chinese Academy of Sciences (Y234081001 and “Interdisciplinary Collaboration Team” program). This is contribution No. IS-1638 from GIGCAS.

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